FM announces tax sops and home loan interest subsidy to boost spending

Finance minister Pranab Mukerjee today announced a slew of changes to the Finance Bill 2009, including certain tax measures and a 1 per cent state subsidy on home loans up to Rs10 lakh, when the overall cost of the house does not exceed Rs20 lakh.

The interest subsidy will be routed through scheduled commercial banks and the housing finance companies registered with the National Housing Bank. The interest subsidy will be available for a period of one year.

A corpus of Rs1,000 crore has been allocated for this, the minister said.

He said the government will release the Direct Tax Code within the next 45 days (ie, by 20th August) for discussion. Any suggestions made in the House will find reflection in the code, he said.

He also announced amendments to service tax rules to be operational from 1 September 2009. Mukherjee exempted repairs and maintenance of roads from the purview of service tax.

The income tax deduction allowed on educational loans allowed to parents of children has now been extended to legal guardians of the students as well.